What is the primary benefit of paying points on a mortgage?

Paying points on a mortgage primarily serves to reduce the interest rate. Points are a form of prepaid interest, with each point typically representing 1% of the loan amount. By paying these points upfront, borrowers can negotiate a lower interest rate for the duration of the loan. This reduction can lead to significant savings over time, as the overall cost of the loan decreases, making monthly payments more manageable.

Lowering the interest rate is particularly beneficial for borrowers who plan to stay in their homes for an extended period because the long-term savings from reduced interest payments can outweigh the initial upfront cost of the points. By lowering the interest rate, borrowers can also improve their monthly cash flow, making it an attractive option for many homebuyers or those refinancing their existing mortgages.